Petrol and diesel drivers could pay more fuel duty to help stop electric cars being taxed
New car tax changes will be introduced in April next year
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Pay-per-mile road pricing could have a negative impact on the number of drivers buying an electric car with experts warning a new measure will need to be introduced.
According to a report from New AutoMotive, it warned against implementing pay-per-mile road pricing in the UK as it could hinder the UKs progress towards net zero.
The study, "Vehicle Taxation: The Next 25 Years", suggested that the proposed road tax policy could have a "detrimental effect" on the UK’s electric vehicle uptake.
The report recommended ruling out pay-per-mile road pricing, citing evidence from Iceland and New Zealand where EV sales declined after similar policies were introduced.
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Drivers could see fuel duty rates rise in the October Budget
PAIt also argued that radical tax reform is unnecessary to support the UK's transition to electric vehicles and that instead a different approach should be considered.
The organisation proposed alternative measures to ensure fair taxation for UK drivers without interfering with EV adoption, including tax based on vehicle efficiency and implementing “modest increases” in fuel duty for petrol and diesel vehicles that would help fund the EV rollout.
The report highlighted how the potential negative consequences of pay-per-mile pricing could be severe for EV adoption.
The organisation pointed out that air pollution and greenhouse gas emissions will naturally decrease as more people switch to EVs, but this will slow down if new tax measures are introduced.
The report also suggested that the impacts EVs have on road wear and tear and congestion are less significant than commonly assumed.
Ben Nelmes, CEO of New AutoMotive, said: “It’s wrong to think that the transition to cleaner transport will take the public finances over a ‘cliff edge’. Electric cars aren’t a sin to be taxed but a boon for the economy.
"Our recommendations suggest a way forward for the Chancellor that is simple and would avoid the kind of bad outcomes seen in other countries that introduce pay-per-mile charging on electric cars.”
“Our recommendations would avoid the creation of an electric car tax penalty that is currently due to come into force in April 2025, and which may prevent more people from accessing the benefits of getting a used electric car. EVs can be good for motorists and the taxman - a win-win for people and the planet.”
The report recommended reforming vehicle excise tax to ensure fairness across all vehicles but not through a pay-per-mile scheme.
For petrol and diesel vehicles, the report proposes modest increases in fuel duty of two pence every three years which would provide sufficient revenue to ensure drivers continue to pay for their emissions.
New AutoMotive also noted that freezing fuel duty has not “significantly hindered” decarbonisation efforts to date, making this gradual approach a viable option.
The proposed pay-per-mile scheme would replace the existing Vehicle Excise Duty which has been the main tax system in the UK for the past 100 years.
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